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Let’s assume you’ve borrowed a sizeable loan from a financial institution. You mapped out an entire repayment plan. Although, things don’t always work out as planned. That’s when you start missing your due dates, making late payments, and before you know it, you start defaulting on your loan.
Once your missed payments start reflecting in your credit history, it will drastically bring down your credit score.
This will lead to rejections of any future applications, as you’re viewed as a risky and irresponsible borrower by potential lenders.
To avoid this pesky situation, you need to know how to remove your name from CIBIL’s defaulter list.
In 1994, the Reserve Bank of India introduced a scheme to include the collection and dissemination of defaulter information. It started with borrowers who have failed to pay Rs.1 crore and above. Then, in 1999, RBI started collecting and disseminating information of defaulters who crossed Rs.25 lakh and above.
To make the classification easier, RBI tagged defaulters into two categories—willful and non-willful. The purpose of this scheme was to figure out who was genuinely in debt and who was deliberately not clearing their dues.
In 2002, RBI requested banks, financial institutions, and state financial corporations to send defaulter data directly to the TransUnion CIBIL. This data would include suit-filed accounts of Rs.25 lakh and above, as well as Rs.1 crore and above.
Currently, TransUnion CIBIL maintains a database of all suit-filed and non-suit-filed accounts, out of which only suit-filed accounts can be accessed on their official website by the general public. For non-suit filed accounts, you need a username and password to access information.
No defaulter's list is maintained by a credit bureau such as CIBIL. However, in case defaulter owes a minimum of Rs.25 lakh to any NBFC or bank and is not wilfully paying it back, his/her name will be mentioned on a list that the Reserve Bank of India (RBI) maintains. All financial institutions will have access to the list so that due diligence can be completed before any loans are provided in the future.
If you have defaulted on your loan, your bank or financial institution will file a complaint to a court, which leads to a lawsuit. This is so the bank or FI you have borrowed from seeks economic relief. If you have crossed the Rs.1 crore threshold or willfully crossed the Rs.25 lakh threshold, your data will be reflected in the public database.
So, how do you tackle a suit-filed account that has been reported to CIBIL?
Reach out to your lender and request them to consider an out-of-court settlement, where you pay the entire amount due. If your lender does consider this option, they will have to report this to the court and withdraw the lawsuit filed against you. However, the case will be withdrawn only once you’ve settled your loan. Your bank is also required to report this to CIBIL so they can update their records.
This may seem convenient and a little too easy, but there is something you should be aware of. If you have received a concession in payment of your dues, your CIBIL report will reflect a ‘settled account’, even if the lawsuit is dropped. It will remain on your report for 7 years. This can cause issues for you in the future, as potential lenders will refrain from approving your loan or credit applications.
In case you cannot pay the amount you owe your lender, you can always justify your reasons in court. The bank may then offer a settlement amount, which you will have to pay, no questions asked.
Several factors can lead to your defaulting on your loan—medical emergency, loss of a job, loss in business, etc. If you think you may not be able to clear your dues, there are certain steps you need to take to avoid a suit-filed account tagged against your name.
One of the first things you can consider is extending your loan’s tenure. Approach your bank, justify why you require an extension, and ask them to increase it. Not only will this give you breathing space but it will also reduce your EMIs significantly. This will help you clear your dues and avoid defaulting too.
You can also ask your bank to defer your EMI payments for a few months. This can be especially helpful if you’ve lost your job or are dealing with a medical emergency. While it’s not common for banks to approve, if you negotiate properly, you may get a good deal. Do keep in mind that deferring your EMIs may attract charges.
Once you have defaulted on a loan, there’s no going back, especially if it’s willful. There are legal consequences that can damage your credit score terribly. If you’re struggling with your loan, don’t hesitate to ask for assistance and advice.
In case you are reported as a defaulter by a lender, the same will be mentioned on the credit report and your credit score will fall. It may be difficult for you to avail a loan in case your credit score is low.
The interest rates will be high if the lender provides you with a loan with a loan credit score. Therefore, it is important that you maintain a high credit score by paying the EMIs and credit card bills on time.
CIBIL does not maintain any defaulters list. However, it does maintain your credit history and that affects your credit score. By following the simple solutions mentioned below, you can improve your credit history which in turn will boost your credit score.
The first step is to pay your entire outstanding amount on your debt followed by getting the clearance from your bank. You will have to obtain a No-Objection Certificate (NOC) from your bank post the payment of your dues in order to get your name removed from the defaulters list.
CIBIL keeps the record of a defaulter for 7 years. The individual’s financial history will be kept in the CIBIL’s database for 7 years so that banks and NBFCs can have access to such important information to determine the creditworthiness of a person.
You will have to reach out to your bank and agree for an out of court settlement if you have defaulted and wish to remove your name from the RBI defaulter’s list. If the bank agrees, you will have to pay the outstanding loan amount, following which the court will be informed of the payment and the case be withdrawn.
You can check your name under the defaulter’s category by visiting the CIBIL official website where you will be able to download your credit report by providing the relevant data. You can then check whether there is any default in the payment of any loan, bill, etc.
No, you cannot hide your CIBIL score. The details of the loan availed by you, the payment made, and the score obtained will be mentioned in the report.
The defaulter will not go to jail. Since it is a civil offence, the accused will have to repay the outstanding amount. Since, loans like personal loans are unsecured, you will not go to jail in case of defaulting.
Yes, scammers can use details of your Aadhaar, PAN, account number, etc. and take loan in your name. Hence, you will have to be careful when providing your details.
The ‘Written-off status will be removed off your CIBIL record by the bank or lender. However, it can take 30 days, or occasionally 45 to 60 days, for the update to appear in your CIBIL report.
CIBIL does not maintain any defaulters list. However, it does maintain the record of your credit history for up to seven years.
Yes, you can raise a request on CIBIL’s official website to remove a wrong entry.
It is not mandatory to have a CIBIL score for short-term loans.
There is less chance for a CIBIL defaulter to get a loan.
TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report. CHECK YOUR CIBIL SCORE now.
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